General Insurance Article - Willis and Towers Watson merge to form Willis Towers Watson


Willis Group Holdings (NYSE:WSH) and Towers Watson (NASDAQ:TW) today announced the signing of a definitive merger agreement under which the companies will combine in an all-stock merger of equals transaction. Based on the closing prices of Willis and Towers Watson common stock on June 29, 2015, the implied equity value of the transaction is approximately $18 billion. The transaction has been unanimously approved by the Board of Directors of each company. The combined company will be named Willis Towers Watson.

 Upon completion of the merger, terms of which are detailed below, Willis shareholders will own approximately 50.1% and Towers Watson shareholders will own approximately 49.9% of the combined company on a fully diluted basis.
  
 The combination of Willis and Towers Watson brings together two highly complementary businesses to create an integrated global advisory, broking, and solutions provider to serve a broad range of clients in existing and new business lines. The combined company will have approximately 39,000 employees in over 120 countries, and pro forma revenue of approximately $8.2 billion and adjusted1/underlying2 EBITDA of over $1.7 billion for the twelve months ended December 31, 2014.3
  
 John Haley, Chairman and Chief Executive Officer of Towers Watson, said,
 “This is a tremendous combination of two highly compatible companies with complementary strategic priorities, product and service offerings, and geographies that we expect to deliver significant value for both sets of shareholders. We see numerous opportunities to enhance our growth profile by offering integrated solutions that leverage Willis’ global distribution network and superb risk advisory and re/insurance broking capabilities to deliver a more robust set of analytics and product solutions across a broader client base, including accelerating penetration of our Exchange Solutions platform into the fast growing middle-market. We also expect to realize substantial efficiencies by bringing our two organizations together, and have a well-defined integration roadmap to capitalize on identified savings, ensure the strongest combination of talent and practices, and realize the full benefits of the merger for all of our stakeholders.”
  
 Mr. Haley continued, “Importantly, our organizations share a client-first mentality and a focus on providing services and solutions that consistently exceed clients’ expectations. As we bring these two companies together, we are confident associates across both organizations will enjoy increased development opportunities as part of a stronger and more global growth company.”
  
 Dominic Casserley, Willis CEO, said,
 “These are two companies with world-class brands and shared values. The rationale for the merger is powerful – at one stroke, the combination fast-tracks each company’s growth strategy and offers a truly compelling value proposition to our clients.
  
 Together we will help our clients achieve superior performance through effective risk, people and financial management. We will advise over 80% of the world’s top-1000 companies, as well as having a significant presence with mid-market and smaller employers around the world.”
  
 Mr. Casserley continued, “We look forward to bringing Towers Watson’s innovative solutions to our clients alongside our broking and advisory services. The opportunity to deliver significant savings to our growing middle market client base with Towers Watson’s market-leading private exchange platform is particularly attractive.”
  
 Transaction Delivers Key Strategic and Financial Benefits
     
  1.   Powerful Global Platform for Profitable Growth: Drives incremental growth opportunity through increased ability to rely upon Towers Watson’s relationships to increase Willis’ penetration in the large U.S. P&C corporate market.
  2.  
  3.   Accelerates Growth in Exchange Market: Provides significant opportunity to accelerate growth in the exchange market by bringing Towers Watson’s best-in-class Exchange Solutions offering to Willis’ significant middle-market relationships.
  4.  
  5.   Expands International Profile: Combined entity will both internationalize Towers Watson’s exchange offering and serve more multinationals around the world, given the expanded capabilities and footprint.
  6.  
  7.   Strong Financial Profile: Combined entity will have a strong balance sheet and financial profile, with a diversified revenue mix across segments, geographies and clients, and significant cash flow generation.
  8.  
  9.   Highly Achievable Cost Synergies: Combination is expected to result in $100-125 million in cost savings to be fully realized within three years of closing, primarily related to the elimination of duplicate corporate costs and economies of scale, in addition to increased efficiencies. These savings are incremental to current cost saving and operational improvement initiatives already underway at each company.
 Transaction Structure
 Pursuant to the terms of the merger, Towers Watson shareholders will receive 2.6490 Willis shares for each Towers Watson share. Towers Watson shareholders will also receive a one-time cash dividend of $4.87 per Towers Watson share pre-closing. Subject to Willis shareholder approval, Willis expects to implement a 2.6490 for one reverse stock split, so that each one Willis share will be converted into 0.3775 Willis Towers Watson shares. If the reverse stock split is approved, Towers Watson shareholders will receive one share of Willis Towers Watson for each Towers Watson share. The merger is not conditioned on Willis shareholder approval of the reverse stock split.
 Willis shareholder ValueAct Capital – owner of approximately 10.3 percent of the common stock of Willis – has entered into an agreement to vote its shares in favor of the transaction.
  
 Management, Governance and Integration
 Upon closing of the transaction, James McCann will become Chairman, John Haley will be Chief Executive Officer and Dominic Casserley will be President and Deputy CEO. The new company’s board will consist of 12 directors total – six nominated by Willis and six by Towers Watson, including Towers Watson’s and Willis’ current CEOs. Additionally, Roger Millay will be CFO.
 Dominic Casserley and Gene Wickes from Towers Watson have been chosen to oversee the Integration Team.
 After closing, the combined company will maintain its domicile in Ireland and significant presence in major markets around the world.
  
 Approvals and Time to Close
 The transaction is expected to close by December 31, 2015, subject to customary closing conditions, including regulatory approvals, and approval by both Willis and Towers Watson shareholders.
  
 Advisors
 Willis received legal advice from Weil, Gotshal & Manges LLP and Matheson, and financial advice from Perella Weinberg Partners, LP; Towers Watson received legal advice from Gibson, Dunn & Crutcher and financial advice from BofA Merrill Lynch.
 Conference Call and Webcast Details
  
 Willis and Towers Watson will host a joint conference call and webcast today at 8:00 a.m. Eastern Time (U.S.) to discuss the proposed merger. Participants will include Towers Watson Chairman and CEO and CFO, and Willis’ CEO and CFO. The general public is invited to listen to the call by dialing (855) 631-5368 (U.S. domestic), or (330) 863-3283 (international), conference ID 75130475, or via a live audio webcast through the Investor Relations sections of the Willis and Towers Watson websites. For those unable to listen to the live broadcast, a replay will be available on both websites or by dialing (855) 859-2056 (U.S. domestic), or (404) 537-3406 (international), conference ID 75130475, beginning approximately two hours after the event. The replay of the conference call will be available through July 14, 2015. The webcast and a podcast will be archived and available online on each company’s website for at least 30 days following the call.
  
 A copy of the investor presentation will be made available on both companies’ investor relations websites.
 Additional information regarding the transaction can be found here willisandtowerswatson.mergerannouncement.com.

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